Zomato eyes 10% stake in e-grocery startup Grofers to counter rising competition from rivals Swiggy and BigBasket

INDIA – India multinational food delivery company Zomato is angling for a 10% stake in Indian e-grocey startup Grofers to stave-off competition from rivals Swiggy and Big Basket.

According to a report by ET Retail, the IPO-bound company has already filed a notification with the Competition Commission of India (CCI) to acquire a 9.3% stake in Grofers. 

According to the document filed with CCI, Zomato has mentioned that the transaction will not lead to any impact on the competitive landscape. 

The development follows an investment round where Grofers closed a US$120 million investment from Zomato and Tiger Global valuing it little over US$1 billion. 

Zomato invested about US$100 in the e-grocer while Tiger Global, a common investor at the two companies, pumped in the balance. 

The development comes as Zomato’s rival Swiggy is aggressively expanding its services beyond food delivery in the race to become a preferred e-commerce platform in the Asian nation. 

The startup recently received US$450 million from SoftBank Vision Fund to help it achieve its goal of expanding beyond food delivery. 
 
To add to the competition, Tata group acquired a majority stake in BigBasket and invested another US$200 million in primary capital in the company.  

Horizontal e-tailers such as Amazon and Walmart-owned Flipkart are also ramping up grocery plays as consumers increasingly migrate online for essentials. 

Grofers already has a significant presence in e-grocery, controlling a 13% market share in FY21, according to data from PGA Labs—the market intelligence unit of Praxis Global Alliance. 

Zomato’s investment in Grofers will thus come in handy, helping the company scale the vertical quickly by combining forces in a highly competitive sector that has incumbents with deep pockets such as Amazon, BigBasket-Tata, Flipkart and Reliance JioMart. 

Meanwhile, Swiggy COO Vivek Sunder who was overseeing Swiggy’s food delivery business  is set to exit the company in October to pursue interests “outside of Swiggy”. 

Swiggy’s chief executive Sriharsha Majety will now take over from Sunder directly overseeing the marketplace business with immediate effect, the company said in a statement. 

Last year, Swiggy’s cofounder and chief technology officer Rahul Jaimini exited to join Pesto Tech, a career accelerator startup. 

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